Google Ups the Ante in Wallet Wars

By Quentin Fottrell

Consumers have been slow to cut up their credit cards and turn on their mobile wallets. But this week, Google Wallet announced a string of features that — to make the proposition more enticing — let mobile wallets do things plastic credit cards don’t.

Google Wallet product managers say they will provide I.D. verification so people can check in for a flight, download virtual boarding passes, and even keep their driver’s license on their mobile phone. (Google declined to say when these features would become available or how many people have downloaded the app thus far.) Through its location-based GPS technology, it already sends shoppers coupons and real-time offers from nearby stores. Experts say these features should finally drive demand for the app. “It offers compelling convenience for consumers and retailers,” says Ben Woolsey, spokesman for credit-card comparison site CreditCards.com.

Just like the Apple’s forthcoming Passbook app, which is due for release with the iPhone 5 next month, Google Wallet will allow consumers to download loyalty cards, money-off coupons and movie and concert e-tickets directly to the phone. Currently, the app supports MasterCard, Visa and Discover debit and credit cards and works in 200,000 locations nationwide. “We want you to be able to leave your leather wallet at home,” Robin Dua, Google Wallet’s head of product management, told a Web conference this week.

Even when it comes to just making purchases, experts say Google Wallet has key advantages over most traditional plastic credit cards. For a start, Google Wallet can carry multiple credit, debit and store cards from different issuers, says Michelle Barnhart, assistant professor of marketing at Oregon State University College of Business. And because it’s a smartphone app, it also has the potential to be a virtual guide for customers in stores, directing them to the best bargains based on their previous purchases.

To be sure, the convenience of the e-wallet could also encourage shoppers to splurge. Previous studies have shown that people spend more when they use credit cards instead of cash because they think less about the value of their item. “Mobile wallets are even more abstract than cards,” Barnhart says. “They are one step farther away from the reality of handing over cash.” Google Wallet’s “single tap” feature — similar to Amazon’s “one click” Buy button — could also encourage more impulse purchases, she says.

That said, it’s still early days for services like Google Wallet. As we reported, thousands of merchants are still not set up for mobile payments, making it more difficult for smartphone users to cut up their plastic. What’s more, consumers are still concerned about security issues. One U.K. survey found that 44% of people were reluctant to adopt mobile wallets due to fears of phone hacking; only 17% of those surveyed say they would use mobile wallets. (Google declined to comment.)

But not everyone agrees with that assessment. It’s simply a case of technology trumping security, says independent retail analyst Jeff Green. “Those using this technology, the bulk of whom are under 40 years of age, care less about who knows their whereabouts or their buying habits,” he says. Woolsey of CreditCards.com says that most people are also prepared to trade privacy for convenience. “In the digital age, privacy is becoming a quaint and fleeting notion,” he says, “unless we all go back to cash and pay phones.”

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Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.